You are the accountant of Isilumko (Pty) Ltd. The operating director wants to tender for a new
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Question:
You are the accountant of Isilumko (Pty) Ltd. The operating director wants to tender for a new mining contract of five years. A new excavator machine is needed for the tender. However, the director has little insight into the company's financial situation and asked you to evaluate whether they should tender for the contract or not.
Additional information:
• The initial cost for the excavator in 2020 is R650 000.
• The company's weighted average cost of capital (WACC) is 12%.
Required:
Use the net present value method and the following cash inflows to advise the director whether the company should tender for the contract or not.
Related Book For
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott
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